Vector posts 2.8% gain in full-year earnings 28 Aug 2015
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Vector posts 2.8% gain in full-year earnings as smart meters lead growth, sees further gain in 2016
By Jonathan Underhill
Aug. 28 (BusinessDesk) - Vector,
the Auckland gas and electricity distribution company,
posted a 2.8 percent gain in pretax earnings, beating its
guidance, as acquisitions helped drive growth in its smart
metering business. It sees further gains in 2016.
Adjusted earnings before interest, tax, depreciation and amortisation rose to $596.9 million in the 12 months ended June 30, from $580.7 million a year earlier and ahead of its February guidance of $588 million, the Auckland-based company said in a statement. Net profit fell about 13 percent to $149 million, on mark-to-market accounting charges and higher interest costs. Sales rose 2.8 percent to $1.29 billion.
Last year, the company bought Meridian
Energy's Arc Innovations electricity metering business,
helping make Vector's technology division its fastest
growing by revenue and earnings. The company has been
diversifying its operations as a buffer to restrictions on
its electricity lines business, where prices are regulated.
Strong growth in Auckland means Vector expects to invest
about $1.8 billion in the city's energy networks over the
next 10 years, it said.
“Vector continues to benefit
from its position as a provider of essential infrastructure
to Auckland, the country’s economic powerhouse," said
chairman Michael Stiassny. "We expect capital expenditure in
Auckland to increase in the coming year, in line with the
significant increase we are seeing in new electricity
connections."
The company expects 2016 adjusted Ebitda to be in a range of $605 million to $620 million. Today it declared a final 2015 dividend of 8 cents a share, fully imputed, with a record date of Sept. 14, payable on Sept. 21. That brings payments for the year to 15.5 cents, up from 15.25 cents a year earlier, and is the ninth year of increases.
Regulated Ebitda rose 2.6 percent in the
year as growth in connections, higher capital contributions
and higher volumes offset regulated price cuts. Revenue from
its electricity business rose 6.3 percent to $670.8 and
Ebitda edged up 0.8 percent to $348.8 million. Still, about
$28 million of the revenue growth was due to an increase in
costs passed directly through to customers, including
Transpower charges, rates and regulatory levies.
"We
believe the current regulatory regime does not adequately
recognise the rising risks - due to advances in technology -
that new investments could be made redundant before they
have delivered a return to investors,” said chief
executive Simon Mackenzie.
"Most distribution
companies do not earn the returns allowed by the regulator,
since actual energy volume growth and the rate of inflation
have been consistently and significantly below the forecasts
used by the (Commerce) Commission to set our revenue. In the
last three years alone, these forecasting differences have
cost Vector $175 million in lost electricity
revenue."
We are also firmly of the view that the
regulatory environment needs to recognise that Auckland is a
special case." he said. "The region is growing strongly, it
has the highest demands for capital and it drives the growth
of the national economy."
Gas transportation sales
gained 3.4 percent to $193.4 million and earnings rose 7.3
percent to $143.2 million on increased volumes, the company
said.
Gas wholesaling revenue dropped 10 percent to
$314.2 million and Ebitda slipped 7.9 percent to $46.9
million, which the company said reflected falling demand
from major power generators and lower oil and gas prices.
The result also reflected higher maintenance costs and costs
relating to arbitration over the price Vector must pay for
the next tranche of Kapuni gas.
Technology sales
jumped about 16 percent to $158.4 million and Ebitda rose
8.2 percent to $108.2 million. Smart meters rose to 958,146
from 675,555 in the prior year including those from Arc
Innovations and the deployment of meters for the SmartCo
consortium of electricity distribution
companies.
Vector deployed 130,000 meters in 2015
financial year, down from 170,000 a year earlier, excluding
almost 140,000 meters acquired with Arc and 13,609 deployed
for SmartCo. It is contracted to install more than 1.2
million smart meters this year, up from 889,000.
Vector shares last traded at $3.16 and have gained 13 percent this year.
(BusinessDesk)
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